In: Finance
You have a borrowing capacity of 5 million USD, and 500 million
JPY.
You observe that the bid/ask interest rate quote on USD is 1%/3%.
The bid/ask interest rate quote on the JPY is 0.5%/2%. The spot
exchange rate is 85.9 JPY/USD, and you expect that the USD is going
to appreciate to 98.4 JPY/USD over the next 6 months (180
days).
If you conduct a speculative trade on your expectations of exchange
rate change, and your expectations are correct, what will be your
total profit, as measured in USD?